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Illegal Phoenixing generally involves stripping a financially stricken company of its assets and transferring those to a new company to avoid paying creditors of the old company. As a result of this increased activity, the Federal Government introduced a raft of new laws known as the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (“the Act”) to combat the practice. After a twelve-month transitional period, these rules will apply to directors who resign from office on or after 18 February 2021.


As at 18 February 2021, a director has 28 days from the date of resignation to notify ASIC. If the notice of the resignation is lodged more than 28 days after the person ceased to be a director, the resignation date will be deemed to be the date on which the written notice is lodged with ASIC and not the actual date of resignation.

An application can be made to either ASIC or the Court to determine an alternative resignation date, but such an application must be within 56 days of the actual resignation if made to ASIC and within 12 months if made to the Court. Application and late notification fees will apply. We expect any such applications to be closely reviewed. The intent of the legislation is to stop directors back-dating resignations to avoid payments to creditors.


There are some limited exceptions to the rules that state the last remaining director cannot cease office without a replacement including:

  • The death of the last director; and
  • If the company has commenced winding up or the director in question did not consent to the appointment in the first place.

These new rules are only one part of the wide-ranging changes introduced by the Act. Other changes, which have already taken effect, include the ability in some circumstances to set aside dispositions of assets which have the effect of defeating creditors (creditor defeating dispositions) and to make directors personally liable for GST.


Despite the above changes aimed at combatting Illegal Phoenixing, legitimate restructuring still gives company directors options when trying to deal with financial problems. For example, the safe harbour provisions that were introduced in September 2017. The provisions provide protection from insolvent trading for directors legitimately trying to rescue a struggling business, which is directly attributable to actions being taken by directors to achieve a better outcome for the struggling business and its creditors.

As always, it is imperative that directors act quickly and seek advice early. For more information please do not hesitate to contact our office on (08) 6323 7000.

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